German Outrage Could Queer Deal

Filed in Debt, euro, Gold, inflation, shares, silver by on May 13, 2010 0 Comments

The Dow Industrials tacked on another big gain yesterday, blithely ignoring a global thumbs-down on Euroland’s latest, trillion dollar bailout package. The blue chip average finished up 149 points on the day, even as rumors circulated that Germany was about to ditch the euro and resurrect the D-mark. Whether or not this is true – and we doubt that it is – it’s clear that the Germans are becoming increasingly angry about having to play rich uncle to their n’er-do-well neighbors. Outside of Germany there appears to be a growing consensus that any further attempts to rescue, just for starters, Greece will simply be throwing (relatively) good money after bad. This thought surfaced with unsurprising vehemence in the Rick’s Picks forum, where hard money rules, but it was surprising to see how quickly it caught on globally. For even as stocks rebounded with psychotic energy following last Thursday’s fleeting dive, the world’s major newspapers were questioning whether the trillion-dollar credit line extended to the PIIGs would do any good. Pessimists were saying it would place a crushing debt burden on countries still able to pay their bills, and even the optimists were not claiming it would do much for Europe’s sclerotic economic growth. The U.S. stock market seemed inured to such doubts – to doubts about anything, really – in continuing its upward course. As the saying goes, “If you can keep a cool head while all those around you are panicking, then perhaps you don’t understand the situation.” In fairness to the institutional speculators who have been teasing and manipulating U.S. stocks higher, they are not buying shares after having thought about the real world, but rather, because, at this moment in time, buying U.S. shares is what money managers are obliged to do with Other People’s Money. For sure, spare cash cannot go into money markets and other liquid vehicles, since the Fed has made certain that even the most frugal savers will be discouraged from sitting on their nest eggs. Gold the ‘A’ Answer So, what does one do with one’s surplus capital in the face of a possible monetary blowout by Euroland? Putting it into physical bullion is always going to be the ‘A’ answer; but beyond that, the problem is difficult to solve, since the bailout is not inflationary per se. …

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German Outrage Could Queer Deal

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